When it comes to intellectual property rights Europeans are highly respectful, except among the young, where buying counterfeits has gown.

That is the primary take-away of an extensive European Community survey of attitudes toward IP rights delivered recently. The findings show that 97% of Europeans believe that IP should be respected, and that inventors, creators, and performing artists need to be paid for their work.

In contrast to the overall positive regard for IP rights, however, 41 per cent of young Europeans, ages 15 to 24, said they believed it was acceptable to buy counterfeits if the original product was too expensive. 15% of those surveyed in that age group said that they had intentionally purchased a counterfeit product in the past 12 months, 9% higher than in a similar 2013 study conducted by the European Union Intellectual Property Office (EUIPO).

“European Citizens and Intellectual Property: Perception, Awareness and Behavior,” a 205-page research report, updates the first EUIPO provides further evidence of how IP rights are regarded by EU citizens at a time when encouraging innovation and creativity is increasingly the focus of economic policy.

“In line with the 2013 results, people do not always act in line with their stated position,” said EUIPO Executive Director, Antonio Campinos, in summarizing the findings. “The key 15-24 age group seems to have become less convinced that fake goods are damaging and is buying more counterfeit goods, mainly for price reasons.”

Significant Sample

“European Citizens and Intellectual Property” surveyed people across all 28 EU Member States about their perceptions of intellectual property survey. It consolidates results of more than 26,000 interviews and confirms the global picture assessed in the EUIPO’s 2013 research.

“Even during a period of economic crisis when household budgets have come under pressure,” the report concluded, “the vast majority of respondents agree that it is important that inventors, creators, and performing artists can protect their rights and be paid for their work.”

Eighty-three percent said they prefer to access digital content through legal or authorized services whenever there is an affordable option available, and 71 percent of those admitting to using illegal sources say they would stop, if they could access affordable alternative options.

Confusion is growing about what constitutes a legal source. In 2016, 24 percent of respondents, five percentage points more than in 2013, wondered if an online source was legal, rising to 41 percent among young people.

Half of the Europeans queried believe that strict protection of IP rights may, in fact, curb innovation, and more than half feel that IP principles are not adapted to the Internet.

New IP licensing model is generating opportunity for content providers and investors; obstacles for file-sharers.

Rightscorp is an IP licensing business model of a different stripe. It monetizes copyrights through widespread enforcement of consumers who download music and movies without paying. While some may consider Rightscorp the first public “copyright troll,” others see it as an important business whose time has come.

Rightscorp (OTCQB:RIHT) is a response to unauthorized music and movie downloading that offers record labels and movie studios an enforcement mechanism to address rampant theft that has plagued those industries. It also provides infringers an inexpensive solution to their transgressions. Like this approach or not, targeting end users through ISPs is bound to ruffle a few feathers, which it already has.

Curbing Digital Crime

It’s been reported that 24% of all Internet traffic is used to distribute copyrighted content without permission or compensation to their creators. If that figure is even remotely accurate, IP theft is rampant and broadly acceptable to consumers, who don’t believe they are doing any real harm.

Rightscorp, whose current market value is about $35 million, provides monetization services to holders of copyrighted intellectual property. The company’s patent pending digital loss prevention technology, says CEO Christopher Sabec, an entertainment industry attorney who has represented the Dave Matthews Band and the Jerry Garcia Estate. It focuses on the infringement of digital content such as music, movies, software, games (and, now, books), and ensures that owners and creators are paid for their work.

Rightscorp is a business model worth understanding. It is a public IP enforcement company that, not unlike patent aggregator RPX, provides a way for large operating businesses to mitigate risk with a market-based solution, in this case by promoting broad enforcement. (It is unclear how frequently have actually sued and collected damages, or shut anyone down.)

The company has been working with Hollywood studios such as Warner Brothers and agencies such as BMG Rights Management, which represents such musicians as David Bowie, Kings of Leon, and Will.i.am, to protect intellectual property and copyrights. The company acts on behalf of the studio, artist, or copyright holder, often sending form letters which offer the downloader several options for financial restitution. It is not clear if lesser known artists are represented.

Typically, Rightscorp sends a settlement notice to the infringing party through their ISP. The settlement notice offers to relieve the legal liability of up to $150,000 per infringement, under the Digital Millennium Copyright Act, the current law. The notice provides a settlement option through Rightscorp for $20 per infringement. If the user chooses not to pay and has repeatedly violated copyright infringements, the ISP may suspend or terminate the subscriber account until a settlement is reached. More than 200,000 people have been sued for copyright infringement on peer-to-peer networks since 2010.

Rightscorp currently represents more than 1,000,000 copyrights with more than 40,000 copyrights in its system, and has received settlements from subscribers of more than 50 ISPs and closed over 60,000 cases of copyright infringement to date.

Streams on the Internet written by violators who have received letters from Rightscorp, including those responding on Answers/Yahoo and Reddit,have derided the company for threatening to sue or shut them down if they do not comply. Rightscorp provides an innovative business model that will require more education to find broad acceptance. For those who have been file sharing for years asking them to stop or pay up is tantamount to putting a tax on the air they breathe. Many patent infringers are not much different. The abuse is so systematic, it does not seem like anything wrong.

The United States manufactures very little today. Its economy is based largely on innovation, and relies on inventions, content and know-how to compete. If we expect to continue along these lines we will need to teach people what IP is, how it can be valuable, and why IP laws need to be taken seriously because they not only enrich record labels, rock stars and the like.

Perpetuating IP abuse is non-unlike cheating on your taxes: even if everybody seems to do it, and its easily done, it does not make it right.

IP theft is rampant globally, but especially in the U.S. and directed at U.S. assets. Lack of education is partially to blame. Schools need to teach parents, and parents and schools together need to teach children about the importance of innovation beyond smartphones and hit songs, and the respect it must be afforded.

Headlines that decry patent “trolls” distort the potential impact of a loose IP regulation. For Rightscorp and other IP monetizers to succeed not only will they need to grow by broadly enforcing copyrights and patents, they will need to turn licensing into a high volume enterprise, and to convince the Americans that respect for creative work is good for everyone.

Royalties from so-called legitimate Internet streaming sites, including Pandora and Spotify, pay most musicians less than a penny on a dollar of revenue generated.

In a page one article in today’s New York Times, “As Music Streaming Grows, Artists’ Royalties Slow to a Trickle,” the paper illustrates how cellist Zoe Keating received just $1,652.74 from Pandora over six months for her songs with they played more than 1.5 million times. On Spotify, wrote the Times, Keating netted just $547.71 for 131,000 plays or 0.42 per play.

The formula makes the old days of Tin Pan Alley look pretty good for struggling song writers and recording artists.

Fans need to remember that even streaming businesses like Pandora and Spotify, as opposed to Megaupload, which pays no royalties and was shut down by authorities, may be great for their personal library but not so good for musicians trying to make a living — and we’re not talking about the Adele and Rhianna.

Some say music streaming is merely a disruptive technology for delivering content people want in a manner they desire. With sufficient volume, it has been argued, royalty payments for top names will eventually catch up to where they were. Don’t bet on it.

A year after being shut down for running Megaupload, an illegal music file sharing website, content pirate Kim Dotcom Schmitz(IP CloseUp, October 5) and IAM 56, “He’s No Robin Hood”) is back going live on Sunday January 20 with, Mega, a new effort to establish a cloud presence for music and movie file sharing, this time with encryption safeguards and “privacy” claims that he believes will allow him to evade authorities.

Mega uses symmetric key encryption in the browser, reports ZDNET. Every file has its own key, and only the uploader knows what it is. Users can share files, but only if they provide downloaders with the key to decrypt the file.

“Personal Use Only”

However, Mega’s terms and conditions implicitly recognize that users will upload copyright material such as back-up copies of their music files for personal use. To reduce storage demands, the system says that it will only store a single copy of files that it recognizes are not unique. How it knows they are not unique is not explained, nor is the system for handling different keys.

Schmitz, larger than life Internet pirate touts himself as a privacy champion. He has been under house arrest in his $30 million mansion in New Zealand awaiting trial for Megaupload. (The incarceration is no doubt a gesture to authorities and supporters alike.) He believes that Mega, launched one year after Megaupload was shutdown, will serve as an alternative.

From the look of Mega’s promotional illustration (right) and press conference, you would think that Schmitz and his crew were an aspiring rock band. They’re not. In fact, they are ripping many of them off, or helping others too.

In an exclusive interview in the Wall Street Journal(yes, WSJ) Schmitz talks about his company’s know-how or trade secrets being violated and his concern about child pornography. He believes that music piracy may be wrong but movies it is not, because through the industry’s business practices “they are forcing people into piracy.” See Schmitz’s Open Letter to Hollywood.

The copyright infringement case against Schmitz, billed as the largest to date given that Megaupload in its heyday commanded around four percent of global online traffic, could set a precedent for internet liability laws and depending on its outcome, may force entertainment companies to rethink their distribution methods.

Schmitz maintains that he is pro-innovation and the governments’ intrusion into individuals’ privacy and antiquated business models are the real villains. Previously, Schmitz, who is said to have a net worth of $200 million, was jailed in Germany for insider trading.

Schmitz, 38, faces years in jail if convicted of copyright infringement in the US. He is under house arrest in New Zealand awaiting a March hearing on whether to extradite him for trial.

* * *

Don’t be seduced by Schmitz’s bling life-style. He wants Mega subscribers to believe that he is a folk hero giving the people what they need and authorities to think that he is an an entrepreneur. He is neither.

The ease of downloading copyrighted content on a computer or smart phone is at the core of an explosion of IP abuse that also impacts branded goods and patented inventions.

Record labels, film studios and publishing houses are among those most directly affected by copyright infringement on the Internet. But musicians, authors, luxury brands and inventors, and thousands of industry jobs and businesses, also are among those feeling the impact of a rapidly growing culture of free-riders. More than 50 pirate political parties and groups in the U.S. and Europe are a symptom of a much greater disease.

Theft of IP rights has not only become acceptable in some circles, it has become fashionable. It feeds off of the ease of digital file sharing and knock-offs, and affects struggling artists and inventors, as well as businesses of all sizes.

The Court of Public Opinion

In the court of public opinion copyrights and brands have fared poorly. Theft of digitally rendered content and counterfeits is easily achieved and difficult to stop. Patents have not done much better. A cultural disdain for IP rights has emerged, facilitated in part by businesses that stand to profit from free content, look-alike goods and others’ inventions, and end users who don’t give a damn.

“He’s No Robin Hood,”my Intangible Investor column appearing in the current (November) IAM, looks at the broader implications of the acceptance of file sharing. Some excerpts from the article:

“File sharing promotes a culture of piracy that makes it more acceptable to steal branded goods and inventions, as well as content. Big daddy Kim Dotcom is sticking it to all IP holders.

“Exhibit A for the legitimization of IP theft is Kim Dotcom Schmitz. Dotcom has slyly built himself into a modern folk hero, replete with a mellow “gangsta” style and outsider reputation. (He is a champion gamer and car racer.)

“This larger-than-life, medallion-wearing bad boy looks like he is deserving of a modest scolding and a heath club membership, not 20 years behind bars. That’s what he and his supporters would like you to believe. In fact, his illegal businesses has generated more than 66 million illegal subscribers and has helped to make file sharing acceptable and dismantle the recording industry.”

“Megaupload and the twilight of copyright”by Roger Parloff in Fortune is an extremely timely article that helps to put file sharing into criminal perspective. It illustrates how in the space of twenty years we went from a society where copyright served the needs of emerging artists and authors, as well as businesses, to one where IP is perceived to impede technological innovation and freedom of expression.

This article truly is a must read for anyone interested new ideas or IP rights. It also serves as a wake-up call for patent holders who expect their rights to be upheld.

“There are no Copyrights,” says Godard

Few filmmakers have been more influential than Jean-Luc Godard. Godard directed such French New Wave classics as Breathless, Weekend and Band of Outsiders, and pioneered the jump cut, a story-telling technique that challenged Hollywood narrative conventions and was adopted by many mainstream filmmakers.

The 79 year-old director, a New Wave intellectual and frequent enfant terrible, has been known to provoke as well as pose. He recently came to the aid of known intellectual property pirate James Climent, a photographer who faces a 20,000 euro fine for violating musical copyrights. Climent now wants to take his case to the Court of Human Rights in Strasbourg, and Godard, has decided to help him with a little money and a lot of publicity.

According to website TorrentFreak, a file sharing blog, the filmmaker donated 1,000 euros to the photographer’s legal fund. After a 2005 search of Climent’s hard drive turned up more than 13,000 mp3 files he was subsequently ordered to pay more than $25,000 damages. Ever defiant, Climent, told Alexandre Hervaud of Ecrans that he now has “more than 30,000 files.”

Godard, who early in his career worked for Twentieth Century Fox as a publicist in Paris, still delights in pushing the hot buttons. When it comes to IP on the Internet audiences prefer to believe Hollywood-inspired myth that pirates like Climent are folk heroes, and those who seek to protect innovators and their works are merely dull defenders of the state.

Duties, not Rights

In a far-ranging interview in the French cultural magazine, Inrockuptibles, Godard said “There is no such thing as intellectual property… Copyright really isn’t feasible. An author has no rights. I have no rights. I have only duties.” (The English translation can be found at the link.) At the same time he speaks lucidly about alluding to images from other films and media as a kind of literary homage or sampling that expands art rather than diminishes it.

The story of Godard, Climent and recent challenges by the French government to repeat downloading violators is conveyed in my latest The Intangible Investor column, Agent Provocateur, out in about a week.

Godard failed to show to receive an honorary Oscar for Life Achievement from the Motion Picture Academy of Arts & Sciences on November 13. (See mock poster above.) His latest feature, Film Socialisme, has been shown at the Cannes and New York film festivals but he has yet to picked up for U.S. theatrical release. The wry director has not suggested the Internet as a distribution alternative.

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About Bruce Berman

I'm a long-time intellectual property observer, adviser and editor, who is in close close contact with the leading holders and most influential people. I track the latest trends and developments, and monitor patent and other IP transactions, strategy and performance.

Since 1988 I have been working with IP holders, managers, lawyers and investors to properly explain the importance of their assets to key audiences, frame disputes and convey transactions.

My five books, including the IP best-seller FROM IDEAS TO ASSETS, deal with IP rights as business assets. THE INTANGIBLE INVESTOR, the column I have been writing for IAM Magazine since 2003, looks at ways IP rights impact stakeholders. For my complete bio visit www.brodyberman.com or click on the link below.